Origin Energy is a product of Grant King’s vision

A young Grant King poses with the then managing director of Boral, Tony Berg, in 1997.

Sixteen years after he oversaw the spin-out of Origin Energy from Boral, Grant King is finally retiring.

While he might have preferred to have retired at a more prosperous moment — Origin has been hit hard by the coincidence of the collapse in oil and gas prices with the final phase of its $25 billion APLNG export LNG project at Gladstone in Queensland — his departure is one that was planned rather than forced by the group’s current circumstances.

Origin’s chairman, Gordon Cairns, said today that King’s retirement after Origin’s annual meeting next month, to be succeeded by the current chief executive of the group’s energy markets business, Frank Calabria, had been three years in the making.

The internal candidates, he said, had been monitored and provided with leadership coaching as the group prepared for the end of a King era at Origin that actually predates its existence. King was the managing director of Boral Energy for six years before Origin and Boral’s pipeline business, Envestra, were simultaneously demerged in early 2000.

While the Origin board did conduct a global search for external candidates, its preference was for an internal candidate and, in Calabria, it has one with a strong CV.

Calabria joined Origin in 2001 as chief financial officer before being appointed CEO of the group’s core energy markets business in 2009. Before Origin, he worked at Pioneer International, Hanson plc and Hutchison Telecoms, so he’s had external and varied experiences to go with an intimate understanding of Origin.

Origin today reflects King’s vision and execution of a strategy to build an integrated energy business, focused on gas and renewables, with exposures from upstream oil and gas exploration and production to downstream energy retailing.

While it is still digesting the initial financial impacts of its 37.5 per cent stake in the APLNG project, with first production from second train scheduled before the end of the year, the Origin portfolio is, thanks, to King, full of options and opportunity and has a base of stable cash flows and earnings from the energy markets businesses Calabria heads.

It is also “long” gas. Even when demand from APLNG is taken into account, Origin has gas reserves that are surplus to its own needs at a time when there is a question mark over the availability of adequate gas resources to support the other two two-train LNG projects at Gladstone and to supply the domestic market. That’s a very strong position, with its own optionality.

Calabria’s initial objective is to continue the balance sheet stabilisation and improvement program King was forced into when the oil price plunged in 2014. Last year, Origin reduced its net debt by $4 billion, from more than $13bn.

Beyond that, there has been discussion, acknowledged by King, about separating/demerging the more volatile upstream exploration and production interests, including (or maybe confined to) the APLNG interest, from the downstream operations.

That would require a more mature and profitable APLNG where, so far, the operational performance, if not the financial performance, has been excellent. There is a view in the sector that while LNG prices might be depressed today there will be a shortage of LNG in the Asian region early next decade. There will be an interesting decision for Calabria and his board about the optimum timing of any demerger.

King is not only one of, if not the, longest-serving CEOs in a market where CEOs have increasingly short tenures, but one of its most cerebral. The development of Origin reflects a sophisticated vision, and its disciplined execution, developed more than two decades ago.

The disfigurement of Origin’s numbers generated by its exposure to APLNG could be regarded as tarnishing his legacy.

The long-term nature of the strategies the group has pursued under King, however, means final judgments on the exact degree of success he has achieved (over what has been an indisputably successful tenure) might take a few years and will now be dependent on the decisions of his successor.

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